Investment Highlights

• August 2019 TIV was up 1% MoM but down 22% YoY to 51.1K units. The sizable YoY decrease in August this year was due to a high base from 2018’s tax holidays. Cumulatively, 8M19 TIV was down 6% to 398.3K units from 423.6K units in 8M18.

• We note the following for major car marques’ in August’s sales figures:
• 1) Perodua registered a total sales volume of 20.0K units (+1% MoM, +13% YoY). The Aruz SUV continued to be the most popular SUV in Malaysia with 2.4K units sold for the month. YTD 8M19, 20.3K units of the Aruz have been sold. It is important to note that among all major car marques, Perodua is the only one that registered a positive YoY growth despite the absence of a catalyst, compared with 17.8K units sold in August 2018.
• 2) Proton delivered 9.1K units (+6% MoM, -4% YoY) in August, including 1.9K units for the X70. The total 8M19 sales for Proton stood at 61.2K units, recording a YoY growth of 37%. Proton maintained its runner-up position in terms of YTD market share at 15.4%, ahead of Honda’s 14.9%. With the sustained momentum and deliveries from volume-oriented models i.e. the Persona, Iriz and Saga, we strongly believe that Proton will end 2019 in the second place, behind the national titan Perodua.
• 3) Honda sold a decent 7.6K units (+1% MoM, -30% YoY) in total sales. YTD, Honda sold a total of 59.4K units compared with 75.0K units in 8M18. Honda’s YTD market share of 14.9% put it in third behind national carmakers Proton and Perodua. The Honda Civic 2019 facelift is currently open for bookings nationwide with a tentative launch in 4QCY2019.
• 4) Toyota sold 5.4K units (-4% MoM, -38% YoY) in August. The UMWH management highlighted that Toyota’s top three best-selling models for the month were the volume-driven Vios, Yaris and Hilux, comprising circa 71% of total sales. We continue to be cautious on Toyota’s outlook in CY2020 due to our expectations of fewer new launches next year while we anticipate competition to heighten in the passenger vehicle space with the expected launch of the all-new Nissan N18 Almera and Honda City 2020. It is important to note that these two models are direct competitors to the Toyota Vios.
• 5) Mazda continued to register flat sales numbers, registering sales totaling 1.0K units (+0% MoM, -49% YoY) in August. Upcoming launches this year for Mazda include the CX-5 CKD (September), CX-8 CKD (October), CX-3 and CX-30 (December).

• The approval rate for loans on passenger cars stood at 63.3% in July, a decrease of 1.1% from June. Nevertheless, it was higher than the average rate of 59.6% in 2018.

• We continue to be optimistic on the national car marques Proton and Perodua, while we stay cautious on the foreign and premium car brands as consumers shift their preferences towards cheaper and better value-formoney vehicles.

• Our top picks for the auto sector are DRB-Hicom (FV: RM3.18) and MBM Resources (FV: RM5.54) as they ride on the strong sales of Proton and Perodua vehicles which command the bulk of the market share in terms of TIV sales.

Source: AmInvest Research - 23 Sept 2019